Federal Construction Spending
The federal government spends over $40 billion annually on construction, renovation, and maintenance of federal facilities, military installations, infrastructure, and public works projects. The U.S. Army Corps of Engineers (USACE), Naval Facilities Engineering Systems Command (NAVFAC), and General Services Administration (GSA) are the largest construction buyers.
Construction NAICS codes include 236220 (Commercial and Institutional Building Construction), 237110 (Water and Sewer Line Construction), 237310 (Highway, Street, and Bridge Construction), and numerous specialty trade codes in the 238xxx range. Size standards for construction are generally higher than for services, ranging from $16.5 million to $45 million in average annual receipts.
Bonding Requirements
The Miller Act requires performance bonds and payment bonds for all federal construction contracts exceeding $150,000. A performance bond guarantees that the work will be completed according to contract terms. A payment bond guarantees that subcontractors and suppliers will be paid.
Bond amounts are typically 100% of the contract value for both performance and payment bonds. Obtaining bonds requires a relationship with a surety company, which will evaluate your financial strength, experience, work in progress, and management capability before issuing bonds.
Bonding capacity is often the limiting factor for construction firms pursuing government work. Building relationships with surety companies early, maintaining clean financials, and gradually increasing your bond history with smaller projects are essential steps for growing your federal construction practice.
Davis-Bacon Act Compliance
The Davis-Bacon Act applies to all federal construction contracts (and most federally-assisted contracts) exceeding $2,000. It requires contractors and subcontractors to pay workers at least the locally prevailing wages and fringe benefits as determined by the Department of Labor.
Wage determinations are specific to the county where the work is performed and the type of construction (building, highway, heavy, residential). You must post the applicable wage determination at the job site and maintain certified payroll records for all covered workers.
Compliance with Davis-Bacon is closely monitored. Violations can result in contract termination, debarment from future contracts, and personal liability for the contractor. Ensure your payroll system can track and report prevailing wages accurately, and train your field supervisors on worker classification requirements.
How Government Construction Is Procured
Federal construction procurement uses two primary methods. Sealed bidding (Invitation for Bids or IFB) awards the contract to the lowest responsive, responsible bidder. This is the most common method for straightforward construction projects where the scope is well-defined in plans and specifications.
Negotiated procurement (RFP with best value evaluation) is used for more complex construction projects, design-build contracts, and IDIQ task order competitions. Under best value, the government evaluates technical approach, past performance, and price to select the offer that provides the best overall value.
Design-build contracts are increasingly popular in federal construction. Under design-build, a single contractor is responsible for both the design and construction, which can reduce schedule and cost compared to traditional design-bid-build. Design-build proposals require demonstrating both design capability and construction experience.
Building a Federal Construction Practice
Federal construction contracting offers significant opportunities for qualified firms, with stable demand, reliable payment, and a strong emphasis on small business participation. The key requirements — bonding, prevailing wage compliance, and construction-specific past performance — create barriers to entry that reduce competition for firms that meet them.
Start with smaller projects (under $750,000) where bonding requirements are more manageable and competition is less intense. Build your bonding history and federal past performance incrementally, and develop relationships with the major construction-buying agencies in your geographic area.